As gold rallied again in the fourth quarter, several Gurus who
had tremendous holdings in the metal began unloading, namely
and Lone Pine's
chose to maintain his position. Both Soros and Paulson have read
economic signs and traded at just the right times to reap profits
and avoid losses on gold in the past, adding significance to
their recent decisions.
Only one Guru,
, substantially increased his holding.
Sellers: George Soros
George Soros, who made his initial fortune shorting the British
pound, has judged the movement of gold quite accurately in recent
years. He amassed more than 6 million shares of the SPDR Gold
Trust ETF (
) in the latter half of 2009, the base of its historic multi-year
run up, around $940 and $1,078 a share. He sold off much of the
holding as the price increased, and had reduced almost all of it
by the second quarter of 2011, when the price reached $1,470 on
Though gold went up for one more quarter, and touched its
all-time high of $1,923.70 in the third quarter, it began to fall
again, and was down to roughly $1,500 by the end of the year.
But Soros foresaw another rally in gold's future and began buying
again, building his stake to 1,320,400 shares in the third
quarter of 2012. Again, he sold at approximately the peak,
reducing almost 55% of the stake in the fourth quarter, when gold
touched close to its 52-week high of $1,741. Gold shares had
tumbled to $1,550 by Wednesday, Feb. 27, 2013.
Around the time of Soros' 2009 investment in gold, he discussed
his position at the World Economic Forum in Davos in January
2010, saying, "When interest rates are low we have conditions for
asset bubbles to develop, and they are developing at the moment.
The ultimate asset bubble is gold."
Interest rates may have again played a role in the fourth-quarter
gold increase, as the World Gold Council explains: "The
re-election of President Obama provided some support for gold
apparently securing the continuation of existing Fed
monetary-policy programmes - through an extension of Chairman
Soros' third-quarter purchase, his second-largest in almost three
years, also came as the Federal Reserve launched QE3 in
On Jan. 31, Soros called for more Federal stimulus, but only if
spent on programs that paid for themselves, such as
infrastructure and education, to improve the economy.
Steve Mandel of Lone Pine Capital sold his entire position in
gold in the fourth quarter. He initially bought 3,750,348 shares
of the Gold ETF Trust in the fourth quarter of 2011 for $164 per
share on average, and had sold over 1.1 million shares of it in
the third quarter of 2012 in his only sale other sale.
Mandel has not publicly discussed his position on gold, but signs
of an improving economy have influenced many investors' decisions
to sell. A relenting of the crisis in the euro zone, debt ceiling
aversion, and a 3.1% increase in U.S. real GDP were strong
U.S. GDP decreased 0.1% in the fourth quarter, however, according
to data released by the Bureau of Economic Analysis on Jan. 30.
Negative drivers were negative contributions from private
inventory investment, federal government spending and exports,
partially offset by personal consumption expenditures,
nonresidential fixed investment and residential fixed investment.
: John Paulson
Paulson, who bought 31.5 million shares of gold in 2009 at
roughly $900 per share, purchased more shares for the first time
since then in the second quarter of 2012. He added 4,526,600
shares for $1,570 per share on average. Unlike Soros, he kept his
entire stake through the fourth quarter.
The massive 2009 purchase was made shortly after the Federal
Reserve decided to spend $1.7 trillion in its first round of
quantitative easing. "We were concerned that the unprecedented
printing of U.S. dollars could lead to future currency
depreciation and that gold offered the best currency alternative
to protect wealth," he wrote in his 2010 letter.
Paulson said that he kept gold ETF shares "exclusively to hedge
the dollar exposure for the Gold Share Class," in his third
quarter 2009 letter.
In 2010, he launched his Paulson Gold Fund, which was his
best-performing fund that year, increasing 35% net.
Similar to conditions during his 2009 purchase, the Federal
Reserve announced a third round of quantitative easing in
September. The new program consists of buying $40 billion in
mortgage-backed securities each month, which combined with its
existing Operation Twist policy, will amount to $85 billion in
bond purchasing per month, with no end date scheduled.
The objective of the policy is to "put downward pressure on
longer-term interest rates, support mortgage markets, and help to
make broader financial conditions more accommodative," the Fed
said in its official statement.
Paulson also kept most of his foremost positions in gold miners
unchanged in the fourth quarter, such as Novagold Resources Inc.
), Randgold Resources Ltd. (
) and Gold Fields Ltd. (
). He did reduce his largest miner position, Anglogold Ashanti
), in which he owns a 7.32% stake, by 0.07%.
Buyer: Jeremy Grantham
Jeremy Grantham of $97 billion GMO LLC was GuruFocus' only Guru
to increase his stake in gold ETF shares. He bought 72,000
shares, increasing his stake by almost 45%, to 233,505 shares.
The micro position comprises just 0.11% of his $33.63 billion
"As inflation picks up, the real price of gold goes up," Grantham
commented in an early 2012 shareholder letter.
He expanded on his opinion in his fourth quarter 2012 letter:
"There seems no particularly obvious reason to assume that gold
should do any better than keep up with inflation over time, nor a
reason to assume it will provide an extraordinary gain in either
an inflationary period or during a depression. It is nicely
portable if you think you might have to leave your home country
in a hurry, but that is certainly not an argument for buying gold
For more articles and data on the Gold Trust SPDR ETF, go here.
Also see John Paulson's portfolio here, George Soros' portfolio
here, Steven Mandel's portfolio here and Jeremy Grantham's
portfolio here.About GuruFocus: GuruFocus.com tracks the stocks
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